Toucey v. Schell , 37 N.Y.S. 879 ( 1895 )

Lawrence, J.

The testator in his lifetime, together with John A. Foley^ Daniel -B. Allen, Arthur IT. Eoley and Elizabeth Foley, executed a several bond by which he and the other persons became severally bound to Louise P. ' W. Foley (wife of John A. Foley), Charles E. Heartt and Harold Heartt, infant children of said Louise P. W. Foley, and unto whomsoever else it may concern, the said John A. Eoley in the penal sum of $170,000, the said Daniel P. Allen in the penal sum of $100,000, the said Edward Schell in the penal sum of $30,000, and the said Arthur M. Foley in the penal sum of $10,000, and the said ■ Elizabeth Foley in the sum of $30,000. The bond is dated May 29, 1.880, and recites that the said John A. Foley is about to be appointed trustee to execute the unexecuted trusts created • by the will of Charles S. Heartt, deceased.

The condition of the bond is that the said John A. Foley shall in all respects faithfully execute said trust and shall duly and faithfully care for and pay over all sums of money and securities which may come to his hands as such trustee, and shall duly account for and with respect to said trust and all said sums of money and securities whenever thereunto duly required.

It is stated that at the time of the execution of this bond the value of the trust estate was about $85,000, and it will be observed that the penalty of the bond wás exactly in double that amount.

John A. Foley accepted the trust and was thereafter found to have converted the whole of the principal of the trust estate to his own use prior to the 1st day of January, 1884, the principal then amounting to the sum of $86,063, together ■with the income of said trust estate amounting to $32,273.62, making a total defalcation of $118,336.62. He was thereupon, by order of this court dated April 2, 1894, removed, and the plaintiff was substituted as the trustee in his place and stead.

The action is brought by the plaintiff as such trustee to recover from the executors of the will of Edward Schell the . full amount of the penal sum of $30,000, with interest thereon from the commencement of this action.

The defendants in their answer allege that Daniel B. Allen and Arthur M. Foley and the legal representatives of Elizabeth Foley, who is now deceased, who were the co-sureties with Mr. Schell, should have been made parties defendant in this action. ;

They further allege as a separate and distinct defense that when the said John A. Eoley became trustee of said trust the capital of the trust estate amounted to about $85,000, but did not exceed that sum, and that it "was understood "and agreed-by and between said Louise P. W. Foley and said John A. Foley, and' the sureties upon said bond, that the said Daniel B. Allen, Edward Schell,' Arthur ¡M. Foley and .Elizabeth Foley should become sureties to the beneficiaries of .the trust to thé amount of the capital of the trust estate, and should be ■severally bound as follows : The said Daniel B. Allen ijn the sum of $50,000, the said Arthur M.- Foley in the sum of . $5,000, the said Elizabeth Foley in. the. sum of $-15,000!, and. the said Edward Schell in the sum of $15,000, amounting in the aggregate to the. value of said trust estate, or $85¿000; that, as was. the" custom in. -such" cases, said" bond was drawn in.the penal sum of double the amount to-be secured by said sureties, respectively, and that the said Edward Schell-,, deceased, was thus made liable under said bond, in the penal-sum of $30,000, to secure that portion of the capital of said trust estate for which he had become surety, to wit,, fifteen eighty-fifths of said capital of said trust estate, or $15j000, and that the limit of. the liability of Edward Schell, deceased, and of- these defendants, upon "sa'id bond, is that proportion of the total liability of all the -sureties on said bond, hot to exceed: in any event the said penal sum of $30,000, and that the actual liability of said Edward Schell, deceased, and of these-" defendants, if any, is now much less than said sum of $30,000."

The defendants also set up as a separate and distinct defense, and by way of counterclaim, that after it had become ¡knpwn to Louise. P. W. Foley, the beneficiary Of the trust mentioned in the complaint, and the . said Edward Schell, deceased, ¡that said John A." Fqley had disposed of said trust property ■ whereby a liability upon said bond had been incurred, said -Edward Schell, deceased, in his lifetime, at the request of the said Louise P. W. Foley, paid over, to her semi-annually for "several years the sum of $'T50, it being the understanding between them that such payments were made and received in discharge and satisfaction, so far as they-went, of any liability of said Edward Schell, deceased, upon said bond. That said ' payments amount in the aggregate to the sum of $7,496.15, which sum was received and. applied by Louise P. W. Foley in lieu of so much of the net income of the trust estate secured to her under said trust.

I think that the point that the other sureties are not made parties defendant cannot be sustained.

The objection that there is a defect of parties plaintiff or defendant, where.it appears upon the face of the complaint, as in this case (if such defect exists), must, under section 488 of the Code of Civil Procedure, be taken by demurrer. Besides, as the bond is several and not joint, or joint' and several, I think that a separate action can be maintained against each surety on his separate liability, without joining- the other sureties as parties defendant. See Code Civ. Proc. § 454; 1 Rumsey’s Pr. 123; Field v. Van Cott, 5 Daly, 308.

As to the second defense, to wit, that the defendant’s testator and the other sureties, under an agreement between them and Mr. and Mrs. Foley, were to become sureties to the beneficiary to the extent only of one-half of the- expressed penalties in the bond, it is to be observed that on the trial no evidence was offered to prove any such agreement. A resort must be had to the bond for the purpose of ascertaining; whether, upon a fair interpretation and construction thereof such an agreement can be implied. A perusal of the bond, satisfies me that n.o such implication can arise. The sureties; did not limit their liability in the principal of the estate nor to the sum of $85,000, but each- surety limited his liability to-the obligees of the bond to the sum therein stated, and in the case of the defendant’s testator to the sum of $30,000.

“A penalty,” in the language of Chief Justice Marshall, in Taylor v. Sandiford, 7 Wheat. 17, “ is to cover the damages which the party in whose favor the stipulation is made may have, sustained from the breach of contract by the opposite party.” In case, therefore, the aggregate default or damage equals or exceeds the penalty fixed in the bond, the obligor is liable in the amount of the penalty expressed in the bond.

The argument which is. advanced by the defendants’ counsel, that-under the peculiar phraseology of this bond the' defendants would not have a right of action' against the other sureties on the bond for contribution, I do not think is .sound.

- See the leading ..case of Deering v. Earl of Winchelsea, 2 B. & P. 270, which holds that if A., B. and C. become; bound as sureties for D. in three separate bonds, and any one of them, be compelled to pay the whole debt of the .principal, the two othérs are compellable to contribute in proportion ' to the. penalties of their respective' bonds. In that case" there were three several bonds, each in the penalty of £4,00Q. The principal became indebted to the crown,, and there was a deficiency after his estate had. been applied to the liquidation of the debt. The whole of this deficiency was collected from the plaintiff, who sued the ^uretiés upon the other two. bonds, asking contribution, and the court held that the sureties in the' other bonds were liable..tó' him. See, also, the same lease in 1 White & Tudor’s Leading Cases in Equity, 115,. 120, and . cases' cited in note., , . , . ¡

Armitage v. Pulver, 37 N. Y. 494, also holds that! Where there are several distinct bonds, with several and distinct penalties, contribution between the sureties is in proportion to the penalties of their respective-bonds.

I am, however, of the opinion that under the third defense in th'e defendants’- answer they are entitlecLto be credited upon the express liability, of $30,000 with the sum of $7,496.15, •the amount paid by-Mr. Schell to Mrs. Foley, the existing beneficiary qf the trust. The liability of Mr. Schell was limited by the express terms of the bond to $30,000, and under the provision of the Code of Civil Procedure his representa- ■ tives are entitled to. set up that paynaent as an equitable defense to this action. .

. The order made by this court upon the removal of Foley as trustee, respecting ..the division of the moneys which may come into the hands of the substituted trustee as between Mrs. Foley and her children, cannot affect the parties to this action, for the reason that they were not parties to and were not heard ' in that proceeding.

To recapitulate, I am of the. opinion that under the terms of -the .bond Mi\ Schell’s^ representatives are liable in the sum of $30,000, and from that sum must be deducted the sum of $7,496.15, paid by him in his lifetime to Louise P. W. Foley before the appointment of the present plaintiff as trustee, leaving a balance ■ of $22,503.85, upon which the plaintiffs are entitled to interest from the 2d day of April, 1894, the date of the order removing the said Foley as trustee.

' Ordered accordingly'.